Infinite Banking doesn't need fancy schmancy strategies to work
If you're not sure what to do with IBC, read this
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One of the most common things I hear from people who’ve discovered The Infinite Banking Concept goes something like this: “I think I’m sold on this idea, but I don’t know what I’d actually DO with it once I have a policy.”
That hesitation is understandable. There’s a lot of content out there selling IBC as the key to some specific investment strategy, e.g., buy a policy, borrow against it, put it into this deal or that fund. And if you don’t have that specific strategy figured out yet, you can feel like you’re not ready.
I’m here to tell you that you are ready. Read on to find out why I’m so confident.
You don’t need a strategy to start
Here’s the most important thing to understand: It is really hard to mess up the Infinite Banking Concept and owning whole life insurance.
The only real way to “do it wrong” is by thinking short-term — being so focused on what you can do right now that you undermine the long-term potential of the process. That’s it. Everything else is workable.
This is because, at its core, Infinite Banking is about strategic capitalization, which is just saving money in a place that gives you a strategic advantage. Capitalization is not “limbo for money,” where it’s just sitting somewhere before the real strategy starts. Capitalization IS the strategy.
Even if you never take a policy loan. Even if you never deploy your capital into a single outside investment. What do you have?
You have your money in a guaranteed, tax-advantaged cash-equivalent asset earning somewhere in the 3–5% real range, which, by the way, is roughly 7% on a capital-equivalent basis when you account for taxes and fees. That is excellent for a liquid, no-strings-attached cash asset. Compare that to a big bank savings account earning next to nothing, or to CDs and bonds, which have terms attached to them.
When’s the last time you took a good look at your emergency fund?
Here’s a huge problem that I see, across the board: people have almost no liquidity. If one or two things go wrong, their whole plan falls apart. They either have to go into debt or they have to start over.
Like, if you have a family and don’t have life insurance (or enough of it), all the value you’ve built up so far, earmarked for your future plans, will likely have to be spent today if the worst happens, just for your family to maintain their standard of living.
But there’s another side to this problem that doesn’t get talked about as much: liquidity isn’t just for emergencies. It’s for opportunities.
Once your emergency fund grows beyond what you need for emergencies, that capital becomes your opportunity fund. And the best opportunities, the ones that actually move the needle, require cash.
So the question becomes: where should that cash sit while it waits? In a bank account earning 0.1%? Or in a whole life insurance policy where it’s growing tax-deferred, accessible tax-free, comes with a guaranteed death benefit, chronic/terminal illness protection, potentially protected from creditors in your state, and enhances your future retirement income strategies and estate planning at the same time?
That’s one chunk of money doing six or seven jobs at the same time.
Discernment is a financial superpower
Most people in the financial world are always chasing. Whatever investment is in front of them ends up getting their money, because they feel like they should always be doing something.
Discernment is a worthy quality in an investor. Having the ability to be patient, to evaluate carefully, to wait for the right opportunity can be the difference between “average returns” and something that’s life-changing. But discernment is a quality that most people never develop because they never build the foundation that makes it possible.
Think about 2008. The people who were over-invested and under-capitalized were forced to sell at lows, while people with cash were buying. The same scenario plays out in real estate, in private business deals, in every market cycle. The question is: are you positioning yourself to take advantage of changes we know are always coming, or will you have to react to them?
The best opportunities are unique to you
Nelson Nash, who wrote Becoming Your Own Banker (the source for all things related to the idea of “banking” with whole life insurance), talked about what he called the golden rule:
“He who has the gold makes the rules.”
This simply means that when you have cash, opportunities have a way of finding you!
And here’s what I’ve found to be consistently true for not only myself, but for many clients and friends, too: the best opportunities aren’t the ones you can access by logging into an app and clicking “buy.” They’re the ones that are specific to you. Your network, your market, your knowledge, and your timing.
Your neighbor wants to sell their investment property quickly and quietly. Your colleague needs a business partner who understands their industry. A piece of real estate becomes available that you understand intimately because you’ve been watching it for years. These opportunities don’t show up in your Robinhood app. They show up because you are who you are …and you have cash!
When you’re well-capitalized, you don’t have to force a strategy. You can just build your position, and the opportunities will come.
Practical uses that don’t require investing at all
IBC isn’t just for sophisticated investors. Here are three ways to use a policy that requires zero investing experience:
Debt elimination. The typical approach to paying off high-interest debt leaves you debt-free but broke. Many people prioritize sending money to financial institutions to get out of debt. There’s nothing wrong with getting out of debt, of course, but if you over-prioritize it, and anything goes wrong, you often end up just going right back into debt. Using policy loans to strategically pay off high-interest debt means that when the debt is gone (including your policy loan), you’re debt-free and also sitting on a bunch of money. You’re not starting from zero.
Financing your lifestyle. Remember, you finance everything you buy. You either pay interest to someone else when you use their money, or you give up interest you could have earned when you pay cash. You can’t eliminate this reality, but you can improve it dramatically with IBC. Using policy loans to finance recurring larger expenses — vehicles, property taxes, even vacations — keeps your capital cycling through your policy and working in your favor.
College funding. Most families either take on debt or pay for college out of pocket, and that money is gone forever. Using IBC, you become the banker. Your kids can take advantage of your well-capitalized position, use your money to pay for college, then pay you back on a schedule you design. Your cash value continues to compound, uninterrupted the entire time, so when the loan is paid back, you have the future value of that college expense to use and enjoy during your hard-earned retirement years. This improvement, alone, is huge.
Capitalizing IS the strategy
To do anything, you have to be capitalized first. Either for a day in a typical bank, or for the rest of your life if you do it strategically. By focusing on strategic capitalization, you don’t have to worry about what comes next. Because whatever that is, you’ll be positioned in a way that is hands-down better than any other way you might do it.
Interested?
Schedule a free consultation at StackedLife.com. I’ll take you through a short assessment to see if and how IBC might benefit you, and what the right next step looks like.